Real Estate Brokerages currently provide assistance in selling and purchasing of real property to individuals and to legal entities that may or may not be owned by multiple individuals. They do not necessarily target and facilitate the purchasing of a property by many buyers. There are several restrictions preventing Real Estate Brokerages from facilitating this. Agents are not allowed to earn commissions on partial purchases of property. They are required to treat all buyers the same making it unethical for them to match buyers by selecting a few from a group of interested buyers. Beehive Planet Method creates targeted services that accomplish collective purchasing by taking on co-ordination of a no. of services that buyer's would have had to organize themselves and uses the power of the computer to cut through the barriers preventing a brokerage from doing these.
In the current real estate market there is good opportunity to buy real estate as an investment. Prices are depressed, there is lot of inventory to choose from, and the economy has converted a number of home owners into renters. However these same economic factors have created a situation where this opportunity is not getting utilized by the public. Mortgages are more difficult to get. Even those that can get mortgages are averse to take the risk as the market continues to decline. The only way to buy real estate for investment without risk of foreclosure and be able to hold it till values climb back, is by cash and most people do not have cash to buy a property outright. The available way then is to buy equity REIT stocks. REIT stocks have limitations. The investor does not have control on what properties are underneath the REIT stock and the investor cannot take advantage of the deals available in the market today through these stocks. Also, REITs represent a conglomeration of properties and it is more like investing in a property management company than in the property itself.
Collective Purchasing with others where each person contributes cash that together adds up to buy one entire property in cash is a way to get around a lot of these barriers. Currently there is no good way to enable it on a large scale. A scale that is large enough so that each contributing person does not have to contribute a substantial amount. Most joint purchases today are among a few people who know each other. Also, real estate conjures up images of an investment that needs constant attention making it difficult to consider it as a financial instrument for investment. Then again, even if people got together and bought the entire standing inventory, there is the fear that they are stuck with it and will not be able to cash out if they had to.
Though securitization of real estate can happen through a public issue, most good property investments do not come out with a public issue, the small ones, more so. Once a seller goes the public issue route there is no turning back to individual buyers making it unattractive for sellers. At the same time, buyers currently prefer going to local real estate agents for purchasing real estate as they are perceived to know the local market better and have a better understanding of qualitative buyer preferences than finance professionals. However real estate brokers cannot do partial sale of real estate as that is illegal because partial sale constitutes a security.
Existing real estate securities mostly consist of REITS where investors do not have control over what their money is invested in. Moreover dependence on mortgage wipes out most of the gains that one might see in a below average rental market.
Hence there exists a need to overcome these limitations to create a robust market for real estate securities.